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PRINCIPLES OF
MICROECONOMICS
FOURTH EDITION
N. G R E G O R Y M A N K I W
PowerPoint® Slides
by Ron Cronovich
6
A C T I V E L E A R N I N G 1:
Answers
Rival in consumption? Only if congested.
Excludable? Only if a toll road.
Four possibilities
uncongested non-toll road: public good
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The Different Kinds of Goods
This chapter focuses on public goods and
common resources.
For both, externalities arise because something
of value has no price attached to it.
So, private decisions about consumption and
production can lead to an inefficient outcome.
Public policy can potentially raise economic
well-being.
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A C T I V E L E A R N I N G 2:
Answers
impose a corrective tax on the use of the land
to “internalize the externality”
regulate use of the land (the “command-and-
control” approach)
auction off permits allowing use of the land
divide the land, sell lots to individual families
Each family will have incentive not to overgraze
its own land.
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Policy Options to Prevent
Overconsumption of Common Resources
regulate use of the resource
impose a corrective tax to internalize the
externality
• example: hunting & fishing licenses,
entrance fees for congested national parks
auction off permits allowing use of the resource
• example: spectrum auctions by the
U.S. Federal Communications Commission
if the resource is land, convert to a private good
by dividing and selling parcels to individuals
CHAPTER 11 PUBLIC GOODS AND COMMON RESOURCES 17
Some Important Common Resources
Clean air and water
Congested roads
Fish, whales, and other wildlife